Mortgage blog: Everything you need to know about the new Help to Buy scheme
Earlier this year, the government announced the second stage of its Help to Buy scheme - an initiative aimed at helping you buy a home if you only have a small deposit. Originally the scheme was set to come into force in 2014 but now the Treasury has announced that ‘Help to Buy 2' will be available now.
Many of the key elements of the scheme are yet to be revealed. However, plenty of information is available and so we outline everything you need to know about the Help to Buy initiative.
What is Help to Buy?
The existing Help to Buy scheme allows you to buy a new build home up to a value of £600,000 with a 5% deposit. It's an equity loan scheme that is interest free for the first five years.
The second stage of Help to Buy, available now, and involves a £12bn liability fund that will guarantee up to 15% of your mortgage. Effectively, the scheme acts as an indemnity for the banks and building societies who sign up in the hope that lenders will provide mortgages more confidently to borrowers with a 5% deposit. It will apply to first-time buyers, home movers and remortgagers and is available on any type of property.
Where can I get a Help to Buy loan?
So far, the government-backed lenders Lloyds and RBS/NatWest along with HSBC and Halifax have confirmed their commitment to the scheme. Some lenders are currently waiting to see details of the fee that they pay the government for the guarantee. They also need to know what sort of capital requirements they need to provide for high loan-to-value mortgages before deciding whether to take part.
How do I go about getting a Help to Buy mortgage?
The Treasury have confirmed that you will apply direct through a bank or building society, although the process will vary from lender to lender. You will provide a 5% deposit and up to 20% will be guaranteed by the government in return for a commercial fee from the lender.
You'll only be able to get a repayment mortgage - not an interest-only loan - and lenders will have to evidence that you can afford the mortgage payments. You will also have to prove your income. In addition, you'll only be eligible for Help to Buy if you don't have any serious adverse credit issues.
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